Credit unions and banks use fees to mitigate the risk of behavior that could cost the organization money. Though these fees help protect the financial institution, they can have a negative effect on those who can afford them the least. The good news is that you can avoid all of them by making informed decisions and paying close attention to the activity on your accounts. Here are some tips to help you steer clear of fees and penalties in the future.
Overdraft fees are assessed when you withdraw more money from your account than you had in it. When you do this, most credit unions and banks will cover the amount of money you’ve overdrawn and charge you a fee for that service. To get back in good standing with that financial institution, you have to deposit the amount that was overdrawn, plus the fee. Overdraft fees vary but can often cost you more than the overdraft amount. For example, a five-dollar overage could result in a $30 fee.
The best way to prevent overdraft fees is by keeping track of transactions to your account using digital banking or a budgeting app. If you always know what your balance is, you can be confident that you won’t overdraw. If you struggle to keep track of your purchases, you can reduce your exposure to overdraft fees with balance alerts in online banking that will let you know when your account balance drops below a certain amount. You could also simply check your balance every morning or set a recurring reminder on your phone.
Some financial institutions offer accounts that require you to pay a monthly maintenance fee if your balance falls below a stated threshold. This fee structure provides an incentive for you to keep your accounts well-funded, which can help you avoid overdraft charges but will cost you money if you can’t maintain a high enough balance.
This is another area where online banking balance alerts can save you. If you have plenty of money, but struggle to keep your account above the threshold, the alerts will warn you when your account is dropping below a given balance so you can move funds and avoid fees. If you drop below the threshold because you don’t have enough to fund the account, you may want to move your money to an account that has a lower threshold amount or does not assess maintenance fees.
Some accounts offer other options for eliminating the fees, which could include using direct deposit or opening additional accounts, so read the disclosures or speak with your branch manager to find out how you can avoid additional charges.
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EARLY WITHDRAWAL PENALTIES
Certificates of deposit (CD) offer higher interest rates in return for the promise that you’ll leave your money with the institution for the duration of the CD’s term, whether three months or five years. CDs are a great savings vehicle because they can offer a much better return on money that you don’t need immediate access to, allowing you to save for larger purchases. On the flip side, withdrawing early will land you with a fee that could reduce your earnings significantly.
To protect yourself from this fee, make sure you have adequate personal savings in addition to the money you’re placing in the CD. When it comes to CDs, you have many terms to choose from, so if you aren’t certain you won’t need the money in six months, but are fairly certain you’re in the clear for at least three months, opt for the three-month CD instead. You can always get a longer-term CD later.
Planning is the key to avoiding this fee, so think critically before you buy a CD, and if you’re looking for another higher-interest account, consider a money market account that won’t assess a fee for early withdrawal. You won’t get quite as much return on the investment, but you also won’t have to be concerned about early withdrawal fees. With that said, you will want to read the fine print on your money market account. Not all money market accounts have fees, but many do.
PAPER STATEMENT FEES
Paper statement fees are easy to eliminate because all you must do is opt out of receiving the paper version of your statement. Being an older person, I am aware that this is not always an easy step to take for those who are used to sitting at the kitchen table and using a pen and paper to balance your statement against your check register. If you’re still balancing your accounts in an old-school way, and own a printer, you could save money by printing out your electronic version. If you have no printer, you could commit to learning how to work with the digital statement online. It will take some time to get used to, but you can do it! You’ll save money and reduce your carbon footprint in the meantime.
ATM fees can run high, so if you need cash regularly, a little planning can save you a lot of money in this area. The easiest way is to use only ATMs within your network, but if you don’t live near an in-network ATM, or pass one on your way to work, that may not do you much good. Some financial institutions will offer a refund on out-of-network fees on ATM withdrawals, so speak with a customer service representative to find out if that is an option.
Another option is to get cash back at the grocery store, convenience store, or another point of sale, using your debit card. You may not be able to take out large amounts of money, but it is great for smaller withdrawals. If you use cash a lot, it may be helpful to schedule weekly visits to your local branch or in-network ATM to make sure you always have enough cash on hand.
These can be the most painful fees because they are so common, but they are all avoidable. The hardest part is creating the plan or habits that will help you save money. Once you’ve figured out what works best for you, you will quickly find that it’s easy to manage your accounts and your money responsibly.
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